Unplugged from the reality of our energy needs

If you ever wonder how academics and activists combine to end up utopian, anti-poor and anti-middle class all at once, look no further than calls for savings and pension divestment from Canadian oil and gas companies.

One academic from Toronto’s Ryerson University wrote of how “we are facing an impending disaster” from fossil fuels. The professor had several demands:

That companies “reduce their carbon footprint to net zero” or be forcibly wound down.

If they don’t voluntarily commit economic hara-kiri, towns and cities must even more massively subsidize green industries to put hydrocarbon industries out of business.

Finally, a demand that the Canada Pension Plan drop its oil and natural gas holdings.

That last idea isn’t as unthinkable as it should be: New York City Mayor Bill de Blasio announced this month that he would direct the city’s five pension funds to dump US$5 billion worth of fossil fuel investments, which he boasted will be the biggest municipal divestment in the U.S. so far.

Calls to kill off carbon-based energy investments are also pushed by the more extreme voices in some environmental groups. One duo claimed (incorrectly) that “The end of the fossil-fuel era is on the horizon.”

Such woolly thinking, a perennial problem in human societies, is evident in the notion that Canadians can just cut off one of the country’s comparative economic advantages, oil and gas. And then replace it, and the many products for end-use consumers, with solar, wind and other costly alternatives.

Reality check: Most alternative green energy, like wind and solar, is inconsistent in terms of power production, requiring conventional backups fuelled by fossil fuels or nuclear energy. Nor are other alternatives such as biofuels and batteries yet capable of replacing, for example, the jet fuel necessary to fly airplanes or the diesel that trucks use to transport food, medicine and consumer goods. Anyone who believes the end of fossil fuels is near is not operating in the realm of reason.

It’s why the International Energy Agency wants more renewable and other alternative energy, but is realistic that oil and natural gas consumption will rise for decades. The IEA forecasts a 30 per cent rise in energy demand between now and 2040, the equivalent of adding another China and India to the global demand curve. The IEA predicts the world will consume 105 million barrels of oil daily in 2040, up from an average of 96 million barrels daily in 2016. It also predicts natural gas consumption will rise dramatically. For instance, natural gas demand in China is forecast to triple between now and 2040.

Even California Gov. Jerry Brown, a champion of green energy, has continued to encourage oil and natural gas development. That’s why California remains the third-largest oil-producing U.S. state. As 60 Minutes noted in a recent profile of Brown, “he refuses to curb oil production until there’s a viable alternative.”

Sure, one could demand that governments just enlist consumers and taxpayers in ever-more subsidies for alternative energy efforts. Yet most renewable energy, from wind to solar, is already heavily subsidized, and remains unreliable and expensive to end consumers.

For example, Ontarians between 2006 and 2014 spent $37 billion on above-market-price subsidies to providers of wind, solar and other energy alternatives. To produce even more will be additionally costly. Also, as I detailed in my recent report Corporate Welfare Cash for the Canadian Taxpayers Federation, alternative energy is already much more subsidized in Canada than is oil and gas. (That noted, oil, gas and renewable energy companies alike should be cut off from taxpayer-funded subsidies; that would help even the playing field among all potential energy suppliers.)

Lastly, the notion that building subsidized wind turbines and solar panels in Canada can replace the jobs, incomes, exports and tax revenues of a long-profitable sector is folly. From Newfoundland to northern British Columbia, there are 300,000 people directly employed in the oil and gas business with 650,000 spinoff jobs. Oil and gas products represent $136 billion in exports to the United States and $22 billion in annual tax revenues to governments.

And that brings us back to advocacy against investment in the energy sector, the so-called divestment movement. In a rebuke to the divestment demands, Quebec credit union Desjardins Group recently ended its moratorium on pipeline project financing. Depending on where Desjardins goes on a more general social and environmental framework, that decision could be positive or merely a prelude to anti-energy investment decisions.

Meanwhile, calls are growing for the Canada Pension Plan to be divested of energy investment. If that happened, a useful investment criteria – returns – would be sacrificed to anti-reality advocacy.

Plus, Canadian employment and income would be reduced by such a decision. It would harm the middle class and the poor. That’s the problem with anti-consumer and anti-empirical advocacy dreamed up in academia and furthered by reality-blind activism. Ideas have consequences, especially bad ones.